Buy now, pay later transactions reach $120B in 2021: report

Buy now, pay later (BNPL) has gained momentum as an alternate payment option, with its global transaction value having reached $120 billion in 2021, according to a report from GlobalData.

And the sector is expected to continue growing. GlobalData projected that the BNPL market could reach $576 billion by 2026. Last year, BNPL made up 2.3% of the global eCommerce market, meaning that for every $100 that was spent, $2 was through a BNPL transaction.

"BNPL is booming in popularity, with the transaction value growing almost fourfold between 2019 and 2021 – $33 billion to $120 billion," GlobalData Payments Analyst Chris Dinga said. "This rapid growth was down to an increasing number of merchants accepting these solutions. There have been some huge partnerships with eCommerce giants such as Amazon and Shopify, opening up a whole new world of consumers."

If you have used BNPL to fund your transactions but are looking for help to pay those debts down, you could consider using a low-interest personal loan. You can visit Credible to find your personalized interest rate without affecting your credit score.

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Younger generations increasingly using BNPL over credit cards

BNPL providers – such as Affirm, Klarna and Paypal – partner with retailers to allow shoppers the ability to split the cost of their online purchases into multiple installments at checkout. These interest-free payments are generally due within a few weeks after the time of purchase. However, missed payments can result in late fees and other penalties.

BNPL is especially popular among younger generations such as millennials and Generation Z, who are the most likely to engage with BNPL options, according to GlobaData.

Younger generations are also increasingly using this option as an alternative to credit cards. In the UK, 47% of consumers ages 18 to 34 do not even own a credit card, the report said.

"Millennials and Generation Z are attracted to the simplicity and speed of BNPL loans, as well as their interest-free nature," Dinga said. "Even though banks are taking steps to appeal to younger generations, their efforts are falling short."

If you are looking for credit options to fund a large purchase, you could consider using a personal loan with a low interest rate. Visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.

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Experts call for greater regulation of BNPL market

While BNPL's popularity is growing, it is not without its concerns. GlobalData said that regulations need to be put in place quickly so that issues surrounding credit scores can be resolved before BNPL becomes a leading payment option.

"The popularity of the sector is raising concerns from regulators," Dinga said. "Since the release of the Woolard report by the Financial Conduct Authority in 2021, the FCA has been trying to bring the UK BNPL sector under its supervision. In February 2022, the FCA was able to force Klarna, Clearpay, OpenPay and Laybuy to change their terms and conditions so they are easier to understand."

And in the U.S., the Consumer Financial Protection Bureau (CFPB) recently opened an inquiry about the usage and safety of BNPL programs.

"BNPL products do not offer the standard consumer protections required of credit card providers or other regulated lenders, and their opacity regarding fees and repayment terms could easily place unwitting consumers into harmful, unaffordable debt," Mike Calhoun, the president of the Center for Responsible Lending (CRL), said in a statement. "Regulators should ensure that BNPL lenders make loans only after determining the borrower’s ability to repay."

Dinga also explained that the lack of transparency in BNPL loans made credit agencies such as Experian and TransUnion unable to capture BNPL on credit reports.

"This lack of reporting could lead to an inaccurate assessment of consumers’ creditworthiness and lead to them being over leveraged on their loans (as they can be approved for loans with multiple BNPL loan providers at the same time)," he said.

If you have outstanding debt from BNPL loans, a personal loan can help you pay it down while avoiding late fees. To see if this is the right option for you, contact Credible to speak to a loan expert and get all of your questions answered.

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